Blog

Building a Case for Sales Commissions Automation

At Intangent, our Strategic Advisory Team has helped companies across multiple industries create value by transitioning from manual to automated sales commission processes. Organizations who rely on manual compensation processes often struggle with a variety of operational bottlenecks. When left unchecked, inefficient manual compensation processes can severely limit an organization’s ability to move beyond challenges.

In most scenarios that we have encountered where organizations have recognized a need to change, cross-functional teams are created to discover and implement corrective measures for common pain points related to existing manual compensation processes. Some of the most common pain points that Intangent has encountered at client sites include:

While a high sense of urgency exists on modernizing legacy sales commissions systems and introducing automation to compensation processes, organizations need to remember that building a compelling business requires further planning.

Why is gaining approval for a sales incentive solution so challenging?

Revealing long-term benefits of automated sales commissions processes can be a complex balancing act that requires both a keen understanding of the solution’s full capabilities and an ability to align immediate challenges with future benefits. Immediate automation benefits such as hard dollar benefits are easily identified because they’re tangible, visible, and often easily quantifiable. Since the objective for business case teams is to obtain approval and advance projects, team members will spend much energy on identifying the immediate hard-dollar benefits instead of adequately evaluating both areas equally. Additionally, other areas that teams may focus on include:

Mapping out existing processes

Measuring waste

Quantifying efficiencies automation will bring

Hard-dollar savings identified often exceed six-figures prompting the internal business case team to declare victory and move to vendor evaluations. Now the feasibility of the automation becomes even more exciting with the presentation of new shiny tools and proofs-of-concept. Finally, “all” data is available to wrap up the business case and enter the internal battle for funding. What if the sales commissions software business case is not approved? Despite a lot of hard and valuable work, excitement from previous steps can turn into disappointment and sour post-mortems.

Teams are questioning what could they have done differently.

When talking to companies with unsuccessful business cases, the number one cause mentioned is not having spent enough time at the beginning on quantifying long-term and soft-dollar benefits.

The Intangent Strategic Services team leaverages a proprietary, industry-tested framework for business case development and vendor evaluations. In addition to speeding up the "idea to funding" process, this framework brings best practices and tools that help internal teams look holistically at the benefits and costs of sales commission automation. You can learn more here.

Intangent also encourages business case teams to focus on and use the following four high-level benefit categories:

How to grow revenues

How to reduce costs

How to gain efficiencies

How to contain risks

Additionally, eliminating and reducing complexity is a top benefit frequently underestimated or omitted from cases related to sales commission automation. Many organizational processes, while initially designed for improving efficiency are foiled by complexity not originally accounted for.

For example, a lack of automation and sub-optimal legacy commission systems have introduced unnecessary complexity that companies need to carry year after year. Compensation administration teams also often complain about the complexity of compensation programs they are asked to roll out. Compensation design teams on their end, complain about the complexity of legacy systems that prevent introducing optimal compensation plans.

Where organizations most commonly miss the mark is simply relying on automation to help them move past their challenges. Merely transitioning manual processes to automated sales commissions software won’t necessarily remove the original challenges. Complexity, both known and unknown, will naturally slow down company objectives. Therefore, organizations need to prioritize regular evaluations of all processes.

What is the impact of incentive compensation management complexity?

The 2017 Sales Compensation Administration Best Practices survey conducted by Xactly(1) found a clear correlation between complex compensation programs and higher error rates in commission payout. The same study also found a relationship between higher complexity and higher turnover rates.

Sales commissions automation provides an opportunity to revisit existing processes and leverage modern systems. As companies move through the new system implementation and process automation, they discover opportunities for reducing complexities. Some Intangent customers reduced the number of software logic components managed post automation vs. manual processes by more than 40%.

It’s important to remember that while teams might experience some of the benefits driven by simplification immediately, the actual benefits will be realized over an extended period.

In addition to generating efficiencies in plan maintenance, simplified systems will speed up year-end plan changes. When complexity is eliminated, compensation teams are more motivated to experiment and spend more time on modeling. When compensation administration teams are spending less time fixing errors, more energy is available for proactive sales force service as well. It’s clear that combating complexity with simplification strategies drives better outcomes and has a direct impact on cross-functional team agility.

How can I maximize the benefits of sales incentive automation?

Sales commission automation will bring multiple benefits for companies such as better alignment with sales strategy, increased effectiveness of sales cycles, reduced errors in payouts, and lower administration costs. However, the highest impact long-term benefit that our consultants have experienced over the years is increased agility through simplification.

Contact our Strategic Advisory Services if you are interested in how you could harness the benefits of simplification through sales commissions automation. You can schedule a meeting here.